Divgi Torq — Q2 FY26 earnings call

Call held 13 Nov 2025

Management summary

Divgi Torq delivered a strong Q2 and H1 FY26, achieving record quarterly total income and robust profit growth driven by healthy volumes in transfer cases and exceptional performance in components exports. A significant milestone was achieved with a nomination from a leading Japanese OEM for a global transfer case platform. While the EV transmission segment remained subdued, management expects a meaningful ramp-up in H2 FY26. The company continues to focus on organic growth and strategic technology acquisition, with a cautious approach to M&A.

Highlights

  • Q2 FY26 Total Income reached a highest ever of INR88.3 crores, marking a 49% year-on-year growth and 15% sequential growth.

  • H1 FY26 Total Income grew by a strong 39% year-on-year to INR165.1 crores.

  • H1 FY26 EBITDA increased by 35% year-on-year to INR41 crores, maintaining a healthy margin of 24.9%.

  • H1 FY26 PAT grew by an impressive 43% year-on-year to INR19.7 crores, with a PAT margin of 11.9%.

  • Exports contributed significantly, reaching over 20% of total income in Q2 FY26, progressing towards the medium-term target of 20-25%.

  • Secured a strategic nomination from a leading Japanese OEM to develop a transfer case for an iconic pickup truck platform, with SOP starting H1 FY28.

Concerns

  • EV transmission segment performance remained muted, declining by 5% in H1 FY26, with subdued EV volumes in the market.

  • Working capital cycle increased due to DDP (destination duty paid) export contracts requiring higher inventory for long sea routes and market volatility.

Key financials

2 periods

Q2 FY26

  • Total Income
    ₹88.3 Cr
    YoY +49% QoQ +15%
  • EBITDA
    ₹22 Cr
    YoY +33% QoQ +15%
  • EBITDA Margin
    24.9%
  • PAT
    ₹10.7 Cr
    YoY +37% QoQ +20%
  • PAT Margin
    12.2%
  • Exports Contribution
    20%

H1 FY26

  • Total Income
    ₹165.1 Cr
    YoY +39%
  • EBITDA
    ₹41 Cr
    YoY +35%
  • EBITDA Margin
    24.9%
  • PAT
    ₹19.7 Cr
    YoY +43%
  • PAT Margin
    11.9%
  • Gross Margins
    63%
  • Exports Contribution
    16%

What they filed

Q1 FY27: revenue up 90.3%, net profit up 177.8% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue54 53 58 72 83 +54%91 +72%108 +86%137 +90%
EBITDA11 9 9 14 17 +55%18 +100%22 +144%37 +164%
Net profit8 5 5 9 11 +38%12 +140%15 +200%25 +178%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

  • Transfer Case Segment
    42% Growth (H1 FY26)
  • EV Transmission Segment
    -5% Growth (H1 FY26)
  • Components Segment
    113% Growth (H1 FY26)

Guidance & targets

Market Share

  • Exports Contribution to Total Income Market Share · medium-term · High confidence 20% to 25%
    Exports, this was most encouraging, contributed nearly 16% in H1 and more significantly, over 20% in Q2 FY '26, helping us make progress towards our medium-term target of 20% to 25%.

    — Jitendra Divgi

Volume

  • EV Transmission Volumes Volume · H2 FY26 · High confidence 20% to 25% improvement
    Broadly, we are expecting about a 20% to 25% improvement in volumes on EV transmissions.

    — Jitendra Divgi

  • Uptick in Export Contracts Volume · from August of '26 · Medium confidence 30% to 40% uptick
    There is a sense that from August of '26 that there's likely to be a further uptick of up to 30% to 40% on some of our contracts.

    — Jitendra Divgi

  • Tata Motors Portfolio Volumes Volume · immediate near future · High confidence at least a 20% to 30% improvement
    But in the immediate near future, what I can tell you is broadening the portfolio just at Tata Motors will give us at least a 20% to 30% improvement in volumes.

    — Jitendra Divgi

Strategic Initiative

  • US Manufacturing Footprint Study Conclusion Strategic Initiative · March end '26 · High confidence conclusion before March end '26
    We expect this study to reach some sort of a conclusion before March end '26.

    — Jitendra Divgi

What to watch in Q3 FY26

EV Transmission Volume Growth

H2 FY26
Current -5% YoY in H1 FY26
Target 20-25% improvement in H2 FY26

Why it matters

EV segment growth is crucial for future revenue diversification and market positioning.

Broadly, we are expecting about a 20% to 25% improvement in volumes on EV transmissions.

Risks & concerns

  • Muted EV transmission segment performance

    medium

    EV volumes in the market were subdued, leading to a 5% decline in the EV transmission segment in H1 FY26. Management expects a ramp-up in H2 FY26 with new platform supplies.

    Management acknowledged

  • Increased working capital cycle

    medium

    The working capital cycle has increased due to DDP export contracts requiring higher inventory levels to manage long sea routes and market volatility.

    Analyst acknowledged

  • Global market uncertainties and US tariff actions

    low

    Despite global uncertainties and US tariff actions, management believes India remains competitive for light-duty applications in the US, and does not foresee significant disruptions.

    Management downplayed

  • Unpredictable marketplace

    low

    The marketplace continues to remain a little unpredictable, requiring the company to strengthen the resilience of its business model.

    Management acknowledged

Q&A highlights

6 direct
New Japanese OEM contract details and global potential Direct
The platform that we are working on is a global platform, okay! And it is a market leader right now in Thailand and ASEAN. The global volumes of this platform and the models that the OEM makes using this platform exceed 1 million. So from a strategic standpoint, this is a big deal for us.

Clarifies the strategic importance of the new OEM win, its global nature, and the company's proprietary technology advantage (weight reduction from 45kg to 32kg) that secured the deal.

Asked by Mahesh Bendre

Contract duration for export components Direct
So typically, our contracts go from 5 to 7 years, sometimes longer. It depends upon the life cycle of these Tier 1 aggregates. What I would like to the insight I would like to offer you is that with electrification coming in, OEMs are reluctant now to do major surgery on the legacy products because there's not much growth globally that they are expecting.

Explains the typical longevity of component contracts and why legacy products continue to be relevant in the context of EV transition, implying stable revenue streams.

Asked by Saania Jain

Incremental revenue from export parts (INR7 crores/month) Direct
Yes. So those are the orders which are currently in execution. The INR90 crore figure comes from the contractual price and the RFQ volumes that were given to us by these Tier 1s. So -- and that is already under execution. In fact, indications are in our conversations with our customers in the United States.

Confirms that the INR7 crore per month revenue potential from export parts is already in execution and incremental to existing orders, providing clarity on export revenue streams.

Asked by Saania Jain

Increasing working capital cycle Direct
What is happening is our export contracts are not all of them, but many of them were negotiated on DDP basis, which is destination duty paid. And you can imagine that if you're operating 10,000 kilometers away from the U.S., we need to have some redundancy in the pipeline because we have a long sea route from Nhava Sheva through the Suez Canal, Mediterranean, Atlantic all the way to the Port of Charleston in South Carolina.

Provides a clear explanation for the increase in working capital, linking it to the logistics and inventory requirements of DDP export contracts.

Asked by Saania Jain

Capital allocation strategy, capex, and M&A Direct
Well, let me just say that right now, our which I alluded in my introductory remarks, by nature, we are a little conservative in our approach. And our philosophy is that because what we've learned is that in this business, your profitability depends a lot on the extraordinary focus we have on the quality management.

Clarifies management's preference for organic growth and a cautious stance on M&A, prioritizing quality and profitability over aggressive expansion through acquisitions.

Asked by Saania Jain

Export geographic mix and EV segment progress Direct
So on exports in terms of the geographic mix, we are right now, the revenue streams that we have are mainly the United States, but there's a very healthy geographic spread within the U.S. But we are also in Mexico, okay! So these are the 2 we have. One program, which is where we've got production approval. It is ramping up towards production in calendar '26, and that is to a place called Viana in Portugal. It is for an Audi production application eventually.

Provides a detailed breakdown of current export markets and future expansion plans (Portugal for Audi), and reiterates the expectation of 20-25% EV volume improvement in H2 FY26.

Asked by Amit Dhameja

3 min read 6 chapters

Detailed narrative

Q2 & H1 FY26 Financial Performance Overview

Divgi Torq reported its highest ever quarterly total income of INR88.3 crores in Q2 FY26, representing a 49% year-on-year growth and 15% sequential growth. For H1 FY26, total income stood at INR165.1 crores, a 39% increase from H1 FY25. EBITDA for H1 FY26 was INR41 crores, up 35% YoY, with a healthy margin of 24.9%. PAT for H1 FY26 reached INR19.7 crores, growing 43% YoY, resulting in a PAT margin of 11.9%. Gross margins remained strong at 63% in H1 FY26, expanding by 119 basis points.

Strategic Win: Japanese OEM Nomination

The company secured a significant nomination from a leading Japanese OEM, a global market leader, to develop a transfer case for their iconic pickup truck platform. This win is highly strategic due to the OEM's global presence and the platform's scale, with over 1 million units. Divgi Torq's proprietary technology, which reduced the transfer case weight from 45kg to 32kg while preserving electronic circuitry, was a key differentiator. Initial application will be in India, but the platform's global nature opens doors for future international expansion.

Segmental Performance: Transfer Cases, EV Transmissions, and Components

The transfer case segment delivered strong growth of 42% year-on-year in H1 FY26, driven by sustained volume offtake from anchor customers like Mahindra, Tata, and Force Motors. The components segment showed robust performance, growing 113% YoY in H1 FY26, primarily export-led. Exports contributed nearly 16% to total income in H1 and over 20% in Q2 FY26. In contrast, the EV transmission segment declined by 5% in H1 FY26 due to subdued market volumes, though a 20-25% improvement is expected in H2 FY26 with the new Sigma platform for Tata.

Export Strategy and Working Capital

Divgi Torq's export business is gaining momentum, with current revenue streams mainly from the United States and Mexico, and a new program for Audi in Portugal ramping up for production in calendar '26. The company is also in talks with customers in Korea, Thailand, and China. The increase in working capital is attributed to DDP (destination duty paid) export contracts, which necessitate maintaining higher inventory levels to manage long sea routes and market volatility. Management views this as a necessary cost for higher export margins.

Next-Gen Transmissions and Technology Focus

The company is focusing on 8-speed dual-clutch automatic transmissions for the passenger segment in India, skipping 6/7-speed options. Drive trials are underway with OEMs to demonstrate superior performance and fuel economy. For commercial trucks, Divgi Torq is investigating rear-wheel drive automatic transmissions. A significant RFQ for a five-speed manual transmission from a major Indian CV OEM is also under evaluation. The company emphasizes its engineering depth and ability to provide integrated high-value solutions globally.

Capital Allocation and Growth Outlook

Divgi Torq's preferred approach for growth is organic, with a focus on aggressively acquiring technology rather than large-scale M&A, citing the challenges of integrating cultures and maintaining quality. The company is evaluating establishing a manufacturing footprint in the U.S. market, with a conclusion expected by March end '26. Management anticipates a 20-30% volume improvement from broadening its portfolio with Tata Motors and a potential 30-40% uptick in some export contracts from August '26.

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